The message comes from someone you like. A cousin, a coworker, a high school friend who resurfaced on Facebook with a warmth she hasn’t shown in 20 years.
She has an opportunity for you. There’s a product. There’s a team. There’s a number that sounds like freedom. It’s all part of a multi-level marketing model.
But she believes it’s real. That’s the part people get wrong about these pitches. She isn’t running a con on you. She’s repeating what she was told, and she’s usually further underwater than you are.
We now have federal numbers on exactly how far.
What regulators found when they opened the books
The Federal Trade Commission and the state of Washington recently filed a complaint against Amway Corp., one of the largest multi-level marketing companies in the U.S., and two of its largest recruiting affiliates, World Wide Group and Leadership Team Development.
The allegation at the center of the complaint is about the pitch itself.
Prospective recruits were told they were likely to earn substantial income topping $40,000 a year, according to the complaint. Some were told they’d likely make enough to replace a full-time job or retire early.
Here’s what the FTC says the records showed instead. Most people who joined through those two groups after 2020 spent more money on products and training than Amway paid them.
Not “earned less than they hoped.” They bought in more than they took out; they lost money.
The promise of a team that never materialized
The complaint alleges two more things worth knowing before you sit through anyone’s presentation.
Recruits were told they’d likely bring in multiple people of their own to help them succeed. Most didn’t.
They were also told they were joining something exclusive, with mentoring from highly successful leaders. The FTC says the opportunity was open to anyone who followed a recruiter’s instructions, and the mentors typically weren’t especially successful themselves.
Then there’s the allegation that goes past optimism. The FTC and Washington say the companies instructed recruits to falsely report selling products they hadn’t actually sold.
Ask yourself why a company would want that. Fake retail sales make the operation look like a business built on selling things to outsiders. Strip them out, and what remains is people recruiting people to buy inventory.
The price tag, and what it buys
Amway and the two affiliates agreed to pay $225 million to resolve the allegations. The FTC says that’s the largest amount it’s ever recovered from a multi-level marketing company.
Nearly all of it is earmarked as refunds for recruits who lost money.
I’ve been doing money stories on TV and online since 1991, and I’ve been pitched by multi-level marketers more times than I can count. The dollar figure isn’t what stopped me here. The remedy is.
Under the proposed order, recruits will be required to sell at least 70% of what they buy from Amway each month to other people.
That number has history. In 1979, the FTC sued Amway as an illegal pyramid scheme and lost, partly because the company already had a 70% rule on its books requiring distributors to move most of what they bought. Forbes has recounted how those “Amway safeguards” became the industry’s legal shield for decades after.
So a rule that was Amway’s defense in 1979 is now its court-ordered fix today. Draw your own conclusion. Mine is that the safeguard everyone kept pointing to wasn’t doing much.
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What else changes under the order
Recruiters get paid less for dead weight. Compensation drops substantially when recruits buy products but don’t resell them.
Sales get documented. Recruits must promptly report every customer sale including the actual price, and Amway must send receipts to those customers.
Faking sales gets you terminated. Amway has to cut off anyone who fabricates sales or teaches others to.
An outside auditor checks the books. Sales records face regular independent audits.
Training is free for a year. Approved provider groups can’t charge new recruits for training or services during their first 12 months.
That last one matters more than it looks. The seminars and materials sold as essential to success were a revenue stream running away from the people who could least afford it.
A few caveats in fairness. These are allegations, and the settlement carries no admission of wrongdoing. The Commission vote was 2-0, the case was filed in federal court in the Western District of Washington, and the terms take effect once a judge signs.
The industry math nobody puts on the slide
Amway is one company. The pattern isn’t.
AARP surveyed Americans who’d participated in multi-level marketing back in 2018. About 47% lost money. Another 27% made nothing.
Only a quarter turned a profit, and more than half of those cleared less than $5,000.
Two-thirds said they wouldn’t do it again.
Now think about where those losses land. You recruit from your contacts list, because that’s who picks up. So the people who lose money are your sister-in-law, your neighbor, someone from church.
That’s the real cost of this business, and it never appears on the compensation chart.
And that’s the reason I’ve always said “no way” to offers like this. When I became a stockbroker in 1981, my manager told me never to solicit friends or family members, unless I wanted to get sideways glances at every party I attended.
That was great advice then, and it’s great advice now. Never, ever sell anything to friends and family.
Five questions that settle it fast
Your friend isn’t your enemy here. But you’re allowed to ask.
1. Where does the money actually come from? If commissions flow mainly from recruits buying inventory rather than outsiders buying products, it’s a recruiting operation with merchandise attached.
2. Show me the income disclosure. Legitimate companies publish average earnings. Look for the median, not the mean, because a few top earners drag the average up.
3. What do I have to buy, and how often? Any required monthly order, “qualifying” purchase or starter kit means you’re the customer.
4. Who buys back my unsold stock, and at what price? Get it in writing before a dollar moves. This is the same test I’d apply to any work-from-home offer that asks for money upfront.
5. Am I paying for my own training? Charging recruits for the training that’s supposedly essential is a business aimed at you, not at the market.
If you’re already in
The inventory in your garage is a sunk cost. It isn’t a reason to buy more.
If you joined Amway through World Wide Group or Leadership Team Development, watch for the FTC’s refund announcement and don’t pay anyone to claim money that’s already yours. The agency posts active cases on its refunds page.
If you want a second income that doesn’t depend on recruiting your relatives, we’ve sorted the side hustles worth your time from the ones that aren’t.
And if you’ve been pitched something that felt off, report it at ReportFraud.ftc.gov. Complaints are how cases like this one get built.
If you’re the one holding the phone deciding how to answer your friend, be kind about it. She was sold the same story. Somebody just checked it.
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